Override Ahead?
Speaker Smith
Do you suppose Shap Smith has the votes?
The Speaker of the House needs 100 of them – that would be 99 of his fellow-Democrats, Progressives, and independents (and possibly a Republican defector if needed?), plus himself, to over-ride Gov. Jim Douglas’s veto of the Fiscal Year 2010 budget and tax package.
“He’s got a hundred and two,” said a state official who tends to know what’s going on in the Legislature.
Could be. Though predicting what any legislative body is going to do two weeks hence is a fool’s errand (the Legislature will reconvene June 2), there are several signs that Smith may have commitments from at least 99 other House members.
The way Smith and Senate President Pro Tem Peter Shumlin have been talking the last few days betrays a bit of confidence, if not quite cockiness, that they can enact their budget over the Governor’s objections. Shumlin’s Senate has such a huge Democratic majority that the override is hardly in doubt. The House vote will be closer, but even Douglas, in announcing last week that he would veto the budget bill, conceded that it might well be over-ridden.
Thereby raising the question of why he’s going to risk the humiliation. It’s only been a month since he suffered the first over-ride of his governorship – and only the seventh in the history of the state – when both houses enacted same-sex marriage despite his veto. Politicians don’t like humiliating defeats. The possibility of two in a row might convince the average governor to make a deal, or even to let this bill become law without signing it.
But Douglas opted to fight, and in his letter to Shumlin and Smith he explained both the principle and the politics of his decision. The principle, from his perspective, is that “if my only choice is between allowing your fiscal 2010 budget to become law or a veto, I must choose veto. I cannot abandon Vermonters’ long-term economic security for short-lived political accord.”
In other words, he thinks that the Democratic spending and tax package is very bad public policy. But he also indicated he thinks it’s very bad politics, which will hurt them and help him before the next election.
“If this budget becomes law over my veto…I am prepared to accept that outcome. But understand that what you reap is what you sow; the adverse effects of your tax and spending choices will ripple through the Vermont economy for years to come and those consequences will be your sole responsibility.”
Allowing for the usual overwrought political rhetoric, the Governor has a point. How long or how deeply the Legislature’s budget/tax package “will ripple through the Vermont economy” is open to debate. But however the ripples flow, it is the Democrats who will be responsible for them.
For the moment, at least, the Democrats seem unconcerned. That’s because they’re convinced that Douglas is wrong on both the policy and politics. They think their budget is good policy that will help the state and therefore help them politically.
Who’s right? Who knows? Budgets, taxes, and economies are complicated, and hard to predict. No, make that impossible to predict. If this Democratic budget/tax package becomes law, it could perk up the state’s economy. Or it could tamp it down.
Or – and this comes close to being a prediction – it could do neither of the above, at least not to an extent that would be countable, much less verifiable. The package is simply not that far-reaching. It raises taxes on some people, but not by much. It reduces taxes for more people, but not by much. It cuts spending on many programs, especially in health care and other human services, enough to degrade the quality of life of the beneficiaries of those programs, but probably not enough to have an economic impact.
Don’t expect either side to allow these mere realities to inhibit their rhetoric. And remember this about budget and tax debates: The competing claims by politicians on both sides can be factually accurate even if they seem to be mutually exclusive.
Thus Douglas claims the Democratic plan raises taxes and increases spending. It does. The Democrats claim their budget reduces taxes and cuts spending. It does.
A budget can both cut and increase spending when some spending formulas are reduced and some programs cut back, but the total dollar amount spent goes up. In this case, the budget calls for spending five percent less than the state is spending this fiscal year from its own sources and from the usual aid it gets from the Federal Government. But then came the Stimulus, or American recovery and Reinvestment Act to be formal. Throw that money into the mix, and the FY2010 budget is higher than this year’s by roughly 3.5 percent.
Obviously, whether one describes this as fiscal responsibility or, as Douglas did, “unsustainable,” depends more on political position than on dispassionate analysis of the evidence.
The same is true of taxes. As Smith wrote in yesterday’s Burlington Free Press, taxes on most people who earn less than $250,00 a year will probably go down. Well, if they earn less than $250,00 a year, don’t smoke or drink (at least not much) and don’t get their television reception via satellite. But when Douglas says that taxes are going up, he’s right, too. Everybody’s income tax rates will go down, but taxpayers will no longer be able to deduct their state income tax payments from their state taxable income, and more capital gains income will become taxable. Add it all up and the state will collect more from its citizens next year under this Democratic plan.
The burden of the (slightly) higher taxes will fall on the wealthy. Their tax rates would go down, too, but they take the biggest state income tax deductions (though they’ll then get a bigger federal income tax deduction), and they tend to have lots of capital gains income. Heavy smokers and drinkers will pay more, too. Almost everyone else will pay less, possibly leading them to increase consumption and therefore help the state’s economy. The wealthy whose tax bills go up are more likely to reduce their savings than their consumption, so that won’t hurt the economy.
But suppose they move out of the state. Douglas did not mention this in his letter to Shumlin and Smith but in the past he and his associates have worried that Vermont’s relatively progressive income tax system inspires some wealthy taxpayers to move elsewhere, taking their job-creating capital with them.
No doubt some might. Just yesterday came word that billionaire Thomas Golisano is leaving New York, which is raising taxes on the wealthy, and moving to Florida, which has no personal income tax (though its economy is in much worse shape than either New York’s or Vermont’s).
But even for a billionaire, Golisano is rather an eccentric fellow who has thrice run for governor as an independent, financing his own campaigns that he had no hope of winning, accomplishing little except the enrichment of some lucky political consultants. By and large, the evidence does not indicate that many rich people move from one state to another because of taxes.
If the economics of the tax and budget dispute are murky, the politics is not. Another veto override would be a political disaster for the Governor. In and of itself, it would not be fatal. Governors have recovered from similar setbacks. But it would weaken him severely. And there is little reason to believe that the results of the Democratic package would be some kind of statewide economic disaster that would be evident by next election day.
That’s why it’s still possible that the detailed budget plan he said he would announce tomorrow might just be more conciliatory than he has indicated. So far, Douglas has talked tough. He even told the Democratic leaders that he doubted they’d like his proposal. He’s come across like a guy spoiling for a fight.
But it’s a fight he really can’t afford to lose. Facing the loss, he could just decide a little more negotiation wouldn’t be such a bad idea after all.
Tags: Jim Douglas, Shap Smith
